Nothing stopping unions from pursuing Calombaris for fines

The deal for George Calombaris' restaurant empire to pay just $200,000 in fines as a penalty for near-$8 million underpaid wages has been lashed as low by unions and the industrial relations minister.

The so-called “contrition payment” represents just 2.5 per cent of the $7.8 million in underpayments by his restaurant group, Made Establishment, that stretch over seven years.

But here’s a little-known fact: there is nothing stopping unions from taking their own action against Calombaris’ company to get additional fines in court.

The Fair Work Ombudsman’s enforceable undertaking imposed on Made Establishment prevented the regulator from taking legal action over the breaches. But that does not bar other parties from taking action.

According to the legislative note for section 715(4) of the Fair Work Act, which governs enforceable undertakings, “a person other than an inspector who is otherwise entitled to apply for an order in relation to the contravention may do so”.

Such a person would include a union. And they could arguably rely on Made Establishment’s admissions over underpayments in the enforceable undertaking, which does not include a “without prejudice” clause.

“There is a question about what sort of penalties a court might think are appropriate once there has been action taken by a regulator but action by employees is open.”

No union has ever taken action with an enforceable undertaking already in place and few now engage in large-scale prosecutions for award underpayments.

The union applicant may still have to provide a court with specific evidence of underpayments and a judge would have to weigh up Made Establishment's backpay, its contrition payment, its commitments to conduct regular audits and its co-operation with the regulator.

Significant factor

However, one of the judge’s considerations in setting any fine would include general deterrence.

Given the scale of underpayments alleged in hospitality and in the fine-dining industry in particular, that may be a significant factor.

While $200,000 is the biggest payment made under an enforceable undertaking, it’s far less than the fines imposed by the courts on much smaller businesses for lower levels of underpayments.

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The significance of the enforceable undertaking should also not be underestimated. Made Establishment is one of several big companies over the past few months that have admitted to millions of dollars in underpayments, including Super Retail Group, Qantas and ABC.

The ombudsman has now made it clear that the default position for large companies that self-disclose underpayments will be a court-enforceable undertaking “as a minimum”.

Such enforceable undertakings will require the employer to make a contrition payment reflecting the seriousness of the breaches.

As ombudsman Sandra Parker said in a recent speech, “it is not acceptable for businesses to throw their hands up when they’ve been underpaying workers and expect to move on without consequences once the back pay is in the workers’ accounts”.

Made Establishment’s $200,000 payment arguably sets the standard for future enforceable undertakings involving the hospitality industry and yet it has not been tested in front of a judge.

"This is a very high-profile case to use an enforceable undertaking on," University of Melbourne workplace law professor John Howe says.

"From a public policy perspective there are a lot of good reasons for unions to want to try and get a court to make an example of that contrition payment.

"But there are risks a court may find the company has already been punished enough."

By agitating for further fines unions may also threaten employers' incentive to enter into enforceable undertakings, which have the benefits of saving taxpayer money.

But such action could set the standard for underpayments in an arena that is only going to become more contested.

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